Macedonia in Agony

The war, which has been going on for almost seven months now, is taking a heavy toll on the Macedonian economy. Damages have reached the DM1.7 billion-mark and threaten to take the country back to where it was 15 years ago.

AIM Skopje, September 6, 2001

Until a month ago, Macedonia's economy was said to be on its knees, on the edge of an abyss. Now analysts are using even more dramatic language to describe it. They warn that unless rigorous protective measures are taken, the economy will simply cease to exist! Quoting the latest data provided by the Macedonian Statistics Bureau, they say the economy is in agony, and the coup de grace is very near, after which it will be dead and buried once and for all. The wounds it suffered in the war are quite deep, and there is no one there to cure them. The economy is on its own because, according to bitter businessmen, the government lacks a strategy from dealing with the vicious circle. All political strength is focused on political issues and the Ohrid peace agreement, which places the stress on constitutional and not economic reforms. The latter will have to wait for better times. If there are to be any. Direct damages from the war have already reached DM1.7 billion. Representatives of the Macedonian Chamber of Commerce and Industry say that situation is grimmer with each new day, threatening to take Macedonia back to where it was 15 years ago!

The ministries in charge of economic matters have neither confirmed nor denied such forecasts. They have finally come up with a method to calculate the damages and are gathering data. Activities aimed at convening an international donors' conference have been intensified and if everything goes well it should be held in Brussels in the middle of October.

Meanwhile, even without "scientific" data, conclusions can be reached by simply observing the situation. First of all, almost no one is working. Most companies, everywhere, and not only in the crisis regions where many facilities were destroyed by shelling and arson, have closed. War operations and blocked border crossings and key roads have closed supply routes and made it impossible for people to go to work. When nothing is produced, nothing can be be sold or exported either. Markets are being lost and business deals cancelled. Americans, Germans, and Dutch companies are pulling out of arrangements with textiles factories. They say they have found more suitable partners in Ukraine and Yugoslavia. Workers are being laid off, and those who still work, rarely get paid. The managers of small and big private companies in the Tetovo crisis region -- Teteks, Edko, Arteks-Gajur, Medicinska Plastika -- according to newspaper reports, are taking advantage of the situation. They are forcing workers who make it to their work places to do two shifts and pay them one. Having little choice in the matter, instead of earning the DM100 they used to get before the war, the poor people can only shut their mouths and be satisfied if they get one half of that. Let us recall that the country's average is already below DM300. Wages are approximate and arbitrary, and are paid without any record. Almost no employers pay health care, pension and disability insurance contributions, and various travel and food bonuses, once paid regularly, have not been paid for who knows how long. With war looming, anarchy reigns in all areas of life. Bills are not being paid, war profiteering is flourishing as well as the grey economy, the latter preventing large-scale social unrest.

Statistics experts prove this with concrete data. In the January-July period of this year, for instance, industrial output has dropped 9.3 percent compared with the same period last year. Only in July it went down 3.9 percent month on month. Of the 32 branches of industry, 19 are running losses, and 10 have slight production increases. Industry and mining have lost the most. Damages are estimated at DM372 million. Next on the list is the textiles industry with DM127 million in losses, the metal industry and power production, with DM125 million in losses, ferrous metallurgy with DM60 million, and so on.

War and drought have decimated farm production as well. Hardest struck is the Kumanovo area. Over 5,000 hectares were either burned or left unharvested, and damages, according to experts and Skopje Agriculture Faculty professors are about DM2 million.

Farmland on Mt. Sar and Mt. Korab are innaccessible because of the presence of armed ethnic Albanian extremists. But as is often the case, when it rains it pours. According to a survey by the Macedonian Chamber of Commerce, drought has caused damages in exces of DM30 million. Wheat crops were affected the most, and the yield has been halved, of which only 160,000 tons are expected to reach storage. It is already certain that wheat will have to be imported.

Exports are down 10 percent, combined with a 25.9 percent drop in imports. The foreign trade deficit in the first seven months of this year reached US$270 million. On top of this illiquidity is rampant and internal debts have skyrocketed. No one is paying any bills and the debts have exceeded one billion German marks. Uncovered losses exceed two billion German marks. The bank accounts of over 30,000 companies, employing some 120,000 peope, have been blocked. Standrards of living are dropping rapidly. Prices are soaring -- in August alone retail prices were up 5.4 percent over the month before, and the cost of living increased 6.6 percent. In the January-July period of this year, compared with the same period last year, prices went up 16,3 percent. Price hikes mostly afected food; they went up 7.8 percent. The 10,515 denar average salary (DM1 = 31 denar) is becoming insufficient for the basic consumer basket, which costs 10,034 denar.

The war has affected all segments of life in the country. The government, on the other hand, using is excessive discretionary rights, rebalanced its budget (the Finance Ministry advertized it as a "tasty pizza budget" in recent TV commercials) so as not to lose anything, and left all expenses to the dying economy. Independent economic analysts blasted the cumulative war tax on every transaction (of 0.5 percent, which actually amounts to 3 percent) as highway robbery through which the state continues its suicidal campaign against its own economy.

True, the situation has changed radically, and there is no one to cover the growing budget deficit, which has reached DM510 million. Most budget funding has been diverted to the army and police, and defense spending has increased by DM437 million. Money obtained from the sale of Telekom, initially meant for development, is now being used to foot the military bill.

What is most paradoxical, stress local officials, is that Macedonia has been left on its own. The international community has helped the Macedonian economy so far only with empty words. These are plenty: the World Bank has promised a US$20 million donation, of which US$15 million to cover the deficit amounting to US$65 million. The European Union plans to invest EUR50 million, the Dutch government promised an annual assistance package of EUR46 million, the U.S. government has set aside US$5 million for repairing destroyed houses in the crisis region. Unfortunately, all this assistance hinges on the ratification and implementation of the Ohrid agreement, which is generally considered blackmail. Prime Minister Ljubco Georgijevski recently told Parliament that instead of rewarding Macedonia and helping it to survive, the internaitonal community is practically punishing it by introducing a silent economic embargo. He said that Macedonia is under an unofficial blockade, because all financial negotiations with the International Monetary Fund and the World Bank have been interrupted, together with 90 percent of all other talks with other institutions and countries. Georgijevski claims that despite these difficulties, the government is firm in its resolve to preserve macroeconomic stability, the national currency, and keeping inflation down.

Many prominent bussines people and foreign representatives of international financial institutions, however, deny this. At a meeting recently held in the Macedonian Chamber of Commerce the government was described as "economically illiterate" and as abusing the grave security situation so that a few powerful officials could make a fortune. Several examples were quoted: the deliberate destruction of profitable companies, such as Makpetrol, hasty and conspicouous privatization deals, and enormous illiegal fees the director of the state Health Care Fund charged for medicine. The government was asked to either urgently adjust to the newly-created circumstances and take steps to save what can be saved, or to step down.

Branka Nanevska

(AIM)